Issues Facing Landlords

The Impact of Section 24 Tax Changes

Section 24 of the Finance (No. 2) Act 2015 — often referred to as the "tenant tax" — fundamentally changed how landlords are taxed on their rental income. Phased in between 2017 and 2020, it removed the ability of individual landlords to deduct finance costs, most notably mortgage interest, from their rental income before calculating tax.

What changed

Before Section 24, a landlord could deduct mortgage interest as a business expense, paying tax only on their profit after those costs. Under the new rules, finance costs are no longer an allowable deduction. Instead, landlords receive a basic-rate (20%) tax credit on those costs. For higher and additional-rate taxpayers, this means tax is effectively charged on revenue rather than profit.

Why it matters

The change pushes many landlords into a higher tax bracket because the full rental income — not the post-interest profit — is now used to calculate taxable income. The practical consequences include:

• Higher tax bills, even where actual profit has not increased.
• Some landlords with highly leveraged properties now making a loss after tax.
• Being pushed into the higher-rate band, affecting child benefit and personal allowance.
• Reduced returns that no longer justify the risk and effort of letting.

The bigger picture

For landlords with mortgages, Section 24 has eroded what was once a dependable margin. Combined with rising interest rates, it has prompted many to reassess whether continuing to let is worthwhile — particularly those approaching retirement or holding properties that no longer generate a meaningful return.

How the Renters' Rights Act Changes the Way Landlords Can Sell

The Renters' Rights Act changes the exit route for landlords who want to sell a rental property. The right to sell remains, but the process is no longer as simple as serving a Section 21 notice, waiting two months, and placing the property on the open market with vacant possession.

For many buy-to-let owners, the practical effect is a longer, more evidence-led sale process. Landlords now need to think earlier about timing, tenant status, notice periods, and what happens if a sale does not complete as expected.

Section 21 is no longer the exit tool

The most important change is the abolition of Section 21 "no-fault" possession. A landlord who wants vacant possession in order to sell must now rely on a valid Section 8 ground. For a straightforward sale, that usually means Ground 1A, which applies where the landlord genuinely intends to sell the property.

Ground 1A is designed to preserve a landlord's ability to sell, but it also gives tenants more protection. The landlord must use the correct notice, meet the statutory timing rules, and be prepared to show that the intention to sell is genuine if the matter is challenged.

The sale timeline is longer

Landlords using Ground 1A normally need to give at least four months' notice. In addition, the notice cannot usually expire during the first 12 months of the tenancy. This creates a protected period for tenants and means a landlord with a newer tenancy may need to wait before vacant possession can be achieved.

• Newer tenancies can delay a sale — where the tenancy is still within its first year, the notice may need to be timed so it expires only after that 12-month period has passed.
• Vacant possession becomes less predictable — if the tenant does not leave when the notice expires, the landlord may still need to apply to court for possession.
• Evidence matters more — landlords should expect to keep clear records of the intended sale, such as agent instructions, valuations, marketing preparation, and sale correspondence.

Re-letting restrictions reduce flexibility

One of the biggest commercial risks is what happens after a landlord serves notice on the basis of selling. Once Ground 1A has been used, landlords face restrictions on re-letting or marketing the property for rent during the restricted period. That matters if the sale falls through, the market slows, or the landlord changes their mind.

Under the old system, a landlord might have tested the sales market and then returned the property to rent if the numbers did not work. Under the new framework, using a sale ground can reduce that flexibility. A failed sale may leave the owner carrying mortgage payments, council tax, utilities, insurance, and maintenance without rental income.

Selling with a tenant in place may become more common

Because vacant possession can take longer, more landlords may consider selling with the tenant still in place. This can work well where the buyer is another investor who values immediate rental income, but it can narrow the buyer pool. Owner-occupiers and many mainstream buyers will usually want vacant possession, which can affect price, timescale, and certainty.

Landlords therefore need to decide early whether they are selling the property as an investment with a tenant, or selling with vacant possession after following the possession process. Each route carries different risks.

What landlords should consider before selling

The Act makes early planning more important. Before serving notice, landlords should consider the age of the tenancy, the likely sale route, the strength of their evidence, the cost of a delayed completion, and whether they can afford a period without rent if the property becomes empty before exchange or completion.

Taken together with Section 24, higher borrowing costs, and tighter compliance rules, the Renters' Rights Act is another reason many landlords are reviewing their portfolios. For some, the right answer will be to keep letting and adapt. For others, selling sooner, before timing becomes more constrained, may be the more practical option.

The Hidden Costs of Being a Landlord

Rental income can look straightforward on paper, but the real cost of owning a buy-to-let property is often spread across repairs, compliance, tax administration, insurance, and empty periods between tenants. These costs rarely arrive evenly, which makes a property that appears profitable one month feel much tighter over the course of a year.

Costs that reduce returns

Beyond the mortgage payment, landlords need to allow for the routine and unexpected expenses that come with keeping a property legally lettable and attractive to tenants. Common pressure points include:

• Maintenance and repairs — boilers, roofs, appliances, damp issues, leaks, and general wear can quickly absorb several months of rental profit.
• Void periods — even short gaps between tenancies can leave the landlord covering council tax, utilities, mortgage payments, and agent fees without rental income.
• Insurance and service charges — landlord insurance, buildings cover, ground rent, service charges, and management company costs can rise independently of rent.
• Letting and management fees — tenant find fees, ongoing management charges, inventories, inspections, and renewal administration reduce the net amount received.
• Compliance and professional costs — safety checks, licensing, accountancy, legal advice, deposit protection, and record keeping all add time and expense.

Why hidden costs are harder now

These expenses have always existed, but they are more difficult to absorb when mortgage rates, tax rules, and regulation are already putting pressure on margins. A landlord who once had a comfortable buffer may now find that one major repair, a delayed tenancy, or a disputed possession wipes out the year's return.

When the numbers stop working

For some landlords, careful budgeting and professional management can keep a property viable. For others, the hidden costs reveal that the asset is no longer producing a return that justifies the capital tied up, the risk carried, or the effort involved. At that point, selling may be a more practical route than continuing to chase a shrinking margin.